SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000.
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-26570
Harrodsburg First Financial Bancorp, Inc.
--------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 61-1284899
- ------------------ ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
104 South Chiles Street, Harrodsburg, Kentucky 40330-1620
- ---------------------------------------------- ---------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (859) 734-5452
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days. YesX No
- ---------------------
As of August 10, 2000, 1,615,575 shares of the registrant's common stock were
issued and outstanding.
Page 1 of 17 Pages Exhibit Index at Page N/A
CONTENTS
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2000 (unaudited) and
September 30, 1999.................................................3
Consolidated Statements of Income for the Three-Month Periods Ended
June 30, 2000 and 1999 (unaudited) and the Nine-Month Periods
Ended June 30, 2000 and 1999 (unaudited)...........................4
Consolidated Statements of Changes in Stockholders' Equity for the
Nine Month Periods Ended June 30, 2000 and 1999 (unaudited)........5
Consolidated Statements of Cash Flows for the Nine Month Periods Ended
June 30, 2000 and 1999 (unaudited).................................6
Notes to Consolidated Financial Statements..................................8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..............................................9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..........................................................16
Item 2. Changes in Securities......................................................16
Item 3. Defaults Upon Senior Securities............................................16
Item 4. Submission of Matters to a Vote of Security Holders........................16
Item 5. Other Information..........................................................16
Item 6. Exhibits and Reports on Form 8-K...........................................16
SIGNATURES
2
HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
---------------------------
As of As of
June 30, September 30,
2000 1999
------------------ ------------------
ASSETS (unaudited)
Cash and due from banks $ 700,043 $ 541,527
Interest Bearing Deposits 2,640,718 7,808,786
Available-for-sale securities 3,122,064 4,008,576
Held-to-maturity securities 6,800,883 7,231,745
Loans receivable, net 98,233,816 89,061,610
Accrued interest receivable 663,267 618,854
Property and equipment, net 1,648,714 1,055,196
Other assets 103,428 89,837
------------- -------------
Total assets $ 113,912,933 $ 110,416,131
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 86,308,794 $ 82,018,317
Advance from Federal Home Loan Bank 1,500,000
Advance payments by borrowers for taxes and insurance 68,075 80,865
Deferred federal income tax 1,094,461 1,395,875
Dividends payable 468,701
Other liabilities 211,188 232,139
------------- -------------
Total liabilities 89,182,518 84,195,897
------------- -------------
Stockholders' equity
Common stock, $0.10 per value, 5,000,000 shares authorized;
2,182,125 shares issued and outstanding 218,213 218,213
Additional paid-in capital 21,211,558 21,194,168
Retained earnings, substantially restricted 11,233,697 11,187,966
Accumulated other comprehensive income 2,010,744 2,595,842
Treasury stock, 566,550 and 481,250 shares as of June 30,
2000 and September 30, 1999, respectively (8,753,787) (7,698,625)
Unallocated employee stock ownership plan (ESOP) shares (1,190,010) (1,277,330)
------------- -------------
Total stockholders' equity 24,730,415 26,220,234
------------- -------------
Total liabilities and stockholders' equity $ 113,912,933 $ 110,416,131
============= =============
See accompanying notes to consolidated financial statements.
3
HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
---------------------------
For the Three-Month Periods For the Nine-Month Periods
Ended June 30, Ended June 30,
------------------------------- ------------------------------
2000 1999 2000 1999
-------------- ------------- ------------- -------------
Interest income:
Interest on loans $ 1,866,039 $ 1,704,284 $ 5,411,461 $ 5,061,573
Interest and dividends on securities 126,469 116,680 372,074 427,044
Other interest income 47,571 125,535 175,925 324,346
-------------- ------------- ------------- -------------
Total interest income 2,040,079 1,946,499 5,959,460 5,812,963
-------------- ------------- ------------- -------------
Interest expense:
Interest on deposits 1,054,669 954,515 2,999,960 2,862,492
Other interest 1,950 1,950
-------------- ------------- ------------- -------------
Total interest expense 1,056,619 954,515 3,001,910 2,862,492
-------------- ------------- ------------- -------------
Net interest income 983,460 991,984 2,957,550 2,950,471
Provision for loan losses 15,000 10,000
-------------- ------------- ------------- -------------
Net interest income after provision
for loan losses 983,460 991,984 2,942,550 2,940,471
-------------- ------------- ------------- -------------
Non-interest income:
Loan and other service fees, net 24,216 25,952 66,952 73,243
Other 5,736 4,099 13,744 10,846
-------------- ------------- ------------- -------------
Total non-interest income 29,952 30,051 80,696 84,089
-------------- ------------- ------------- -------------
Non-interest expense:
Compensation and benefits 310,029 232,961 893,248 698,607
Occupancy expenses, net 55,691 40,636 141,722 108,147
Federal and other insurance premiums 4,323 12,249 21,193 36,209
Data processing expenses 45,243 31,989 126,677 94,794
State franchise tax 35,234 35,639 94,707 94,308
Other operating expenses 123,640 74,636 386,690 270,629
-------------- ------------- ------------- -------------
Total non-interest expense 574,160 428,110 1,664,237 1,302,694
-------------- ------------- ------------- -------------
Income before income tax expense 439,252 593,925 1,359,009 1,721,866
Income tax expense 149,346 201,935 462,029 585,435
-------------- ------------- ------------- -------------
Net income $ 289,906 $ 391,990 $ 896,980 $ 1,136,431
============== ============= ============= =============
Earnings per common share $ 0.19 $ 0.24 $ 0.59 $ 0.69
============== ============= ============= =============
Earnings per common share
assuming dilution $ 0.19 $ 0.24 $ 0.59 $ 0.69
============== ============= ============= =============
Weighted average common shares
outstanding 1,506,709 1,600,084 1,529,326 1,641,887
============== ============= ============= =============
Weighted average common shares
outstanding after dilutive effect 1,506,709 1,600,084 1,529,326 1,641,887
============== ============= ============= =============
See accompanying notes to consolidated financial statements.
4
HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
for the nine month periods ended June 30, 2000 and 1999
(unaudited)
---------------------------
Accumulated
Common Additional Retained Other Comprehensive
Stock Paid-in Capital Earnings Income
-------------- ------------- -------------- -------------
Balance, September 30, 1998 $ 218,213 $21,154,129 $ 11,003,179 $ 2,475,007
Comprehensive income:
Net income 1,136,431
Other comprehensive income, net of tax
unrealized gains on securities 426,104
Total comprehensive income
Dividend declared (854,975)
ESOP shares earned 31,742
Purchase of common stock, 199,943 shares
-------------- ------------- -------------- -------------
Balance, June 30, 1999 $ 218,213 $21,185,871 $ 11,284,635 $ 2,901,111
============= ============= ============== =============
Balance, September 30, 1999 $ 218,213 $21,194,168 $ 11,187,966 $ 2,595,842
Comprehensive income:
Net income 896,980
Other comprehensive loss, net of tax
unrealized loss on securities (585,098)
Total comprehensive income
Dividend declared (851,249)
ESOP shares earned 17,390
Purchase of common stock, 85,300 shares
-------------- ------------- -------------- -------------
Balance, June 30, 2000 $ 218,213 $21,211,558 $ 11,233,697 $ 2,010,744
============== ============= ============== =============
Unearned Total
Treasury ESOP Stockholders'
Stock Shares Equity
-------------- ------------- --------------
Balance, September 30, 1998 $ (4,477,515 $(1,391,400) $ 28,981,613
--------------
Comprehensive income:
Net income 1,136,431
Other comprehensive income, net of tax
unrealized gains on securities 426,104
--------------
Total comprehensive income 1,562,535
Dividend declared (854,975)
ESOP shares earned 85,560 117,302
Purchase of common stock, 199,943 shares (2,923,029) (2,923,029)
-------------- ------------- ------------
Balance, June 30, 1999 $ (7,400,544 $(1,305,840) $ 26,883,446
============== ============= ============
Balance, September 30, 1999 $ (7,698,625) $(1,277,330) $ 26,220,234
------------
Comprehensive income:
Net income 896,980
Other comprehensive loss, net of tax
unrealized loss on securities (585,098)
------------
Total comprehensive income 311,882
Dividend declared (851,249)
ESOP shares earned 87,320 104,710
Purchase of common stock, 85,300 shares (1,055,162) (1,055,162)
-------------- ------------- ------------
Balance, June 30, 2000 $ (8,753,787 $(1,190,010) $ 24,730,415
============== ============== =============
See accompanying notes to consolidated financial statements.
5
HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
---------------------------
For the Nine-Month Periods
Ended June 30,
-------------------------------------------------
2000 1999
-------------- -------------
Operating activities
Net income $ 896,980 $ 1,136,431
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 15,000 10,000
ESOP benefit expense 104,710 117,302
Provision for depreciation 72,956 41,911
Loss (gain) on sale of fixed asset 3,397
Amortization of loan fees (57,036) (56,095)
Accretion/amortization of investment
premium/discount (96) (3,022)
FHLB stock dividend (80,100) (73,400)
Change in:
Interest receivable (44,413) 53,732
Interest payable 2,968 820
Accrued liabilities (23,919) (65,707)
Prepaid expense (13,591) (4,183)
Income taxes payable 126,847
-------------- -------------
Net cash provided by operating activities 873,459 1,288,033
-------------- -------------
Investing activities
Net (increase) decrease in loans (9,130,170) (2,310,969)
Maturity of securities held-to-maturity 500,000 4,500,000
Principal repayments - mortgage back securities 11,058 10,881
Purchase of property and equipment (666,474) (176,678)
-------------- -------------
Net cash provided (used) by investing activities (9,285,586) 2,023,234
-------------- -------------
See accompanying notes to consolidated financial statements.
6
HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
(Unaudited)
---------------------------
For the Nine-Month Periods
Ended June 30,
-------------------------------------------------
2000 1999
-------------- -------------
Financing activities
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts 64,720 1,453,229
Proceeds from FHLB advances 1,500,000
Net increase (decrease) in certificates of deposit 4,225,757 2,394,846
Net increase (decrease) in custodial accounts (12,790) (10,790)
Purchase of treasury stock (1,055,162) (2,923,029)
Payment of dividends (1,319,950) (1,209,420)
--------------- ---------------
Net cash provided (used) by financing activities 3,402,575 (295,164)
--------------- ---------------
Increase (decrease) in cash and cash equivalents (5,009,552) 3,016,103
Cash and cash equivalents, beginning of period 8,350,313 8,074,105
--------------- ---------------
Cash and cash equivalents, end of period $ 3,340,761 $ 11,090,208
=============== ===============
Supplemental Disclosures
Cash payments for:
Interest on deposits $ 2,998,942 $ 2,861,673
============== =============
Income taxes $ 465,000 $ 515,000
============== =============
See accompanying notes to consolidated financial statements.
7
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Harrodsburg First Financial Bancorp (the "Company") was formed at the
direction of First Financial Bank (the "Bank") to become the holding
company of the Bank upon the conversion of the Bank from mutual to stock
form (the "Conversion"). The Company's sole business is to serve as a
holding company for the Bank. Accordingly, the financial statements and
discussions herein include both the Company and the Bank. The Company was
incorporated at the direction of the Board of Directors of the Bank in
June 1995. On September 29, 1995, the Bank converted from mutual to stock
form as a wholly owned subsidiary of the Company. In conjunction with the
Conversion, the Company issued 2,182,125 shares of its common stock to the
public.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
("GAAP") for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements. In the opinion of management, all adjustments
(consisting of only normal recurring accruals) necessary for fair
presentation have been included. The results of operations and other data
for the three and nine month periods ended June 30, 2000 are not
necessarily indicative of results that may be expected for the entire
fiscal year ending September 30, 2000.
2. Dividends
On March 20, 2000, the Board of Directors of the Company authorized the
payment of a cash dividend of $.30 per share to all shareholders of record
on March 31, 2000 payable on April 14, 2000. The total dividends paid by
the Company for the nine months ended June 30, 2000 amounted to
$1,319,950.
3. Treasury Stock
The Company repurchased a total of 38,200 shares at a total price of
$453,578 during the three months ended June 30, 2000. During the nine
months ended June 30, 2000, a total of 85,300 shares had been repurchased
at a total price of $1,055,162.
8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
The Company's consolidated assets increased approximately $3.5 million, or 3.2%
to $113.9 million at June 30, 2000 compared to $110.4 million at September 30,
1999. The net increase of $3.5 million was due primarily to a $9.2 million
increase in net loans receivable and a $594,000 increase in net property and
equipment, offset in part by a decrease of $1.3 million in investment securities
and a decrease of $5.0 million in cash and interest-bearing deposits.
The Company's investment portfolio decreased approximately $1.3 million.
Securities classified as available- for-sale and recorded at market value per
SFAS No. 115 decreased $890,000 due solely to the decrease in market value of
such securities. Securities held-to-maturity decreased $430,000 primarily due to
the call of one $500,000 FHLB bond.
Under SFAS No. 115, unrealized gains or losses on securities available-for-sale
are recorded net of deferred income tax as a separate component of retained
earnings. At June 30, 2000, the Company included net unrealized gains of
approximately $2,011,000 in retained earnings. At September 30, 1999, the
Company included net unrealized gains of approximately $2,596,000 in retained
earnings. Per SFAS No. 115, such gains or losses will not be reflected as a
charge or credit to earnings until the underlying gains or loss, if any, is
actually realized at the time of sale.
Loans receivable increased by $9.2 million, or 10.3%, from $89.0 million at
September 30, 1999 to $98.2 million at June 30, 2000 as management continued its
efforts to be competitive in meeting the loan demand in the Bank's market area.
Deposits increased $4.3 million, or 5.2% from $82.0 million at September 30,
1999 to $86.3 million at June 30, 2000. This increase reflects the Company's
competitively priced product line within the local market area.
Stockholders' equity decreased by $1.5 million to $24.7 million for the
nine-month period ended June 30, 2000. The net decrease of $1.5 million is due
to decreases of $1.1 million from the purchase of the Company's stock, the
declaration of dividends totaling $851,000, and a decrease of $585,000 in net
unrealized appreciation on investments held-for-sale, offset by net income for
the nine-month period of $897,000 plus an increase of $105,000 related to the
release of ESOP shares from collateral during the nine-month period ended June
30, 2000.
Results of Operations for the Three Months Ended June 30, 2000 and 1999
Net Income
Net income decreased by $102,000, or 26.0%, for the three month period ended
June 30, 2000 as compared to the same period in 1999. The net decrease of
$102,000 was due to an increase of $146,000 in non-interest expense, and a
$9,000 decrease in net interest income offset by a $53,000 decrease in income
tax expense for 2000 compared to 1999.
9
Net Interest
Net interest income for the three months ended June 30, 2000 was $983,000
compared to $992,000 for the same period in 1999. The decrease in net interest
income in 2000 of $9,000 was due to an increase of $102,000 in interest expense
offset by an increase of $93,000 in interest income.
Interest Income
Interest income was $2.0 million, or 7.4% of average interest-earning assets,
for the quarter ended June 30, 2000 as compared to $1.9 million, or 7.1% of
average interest-earning assets, for the quarter ended June 30, 1999. Interest
income increased $93,000 or 4.8% from 1999 to 2000. The change was due to an
increase of $1.3 million in the average balance of interest-earning assets
during the quarter ended June 30, 2000 compared to the quarter ended June 30,
1999, and a 30 basis point increase in the average rate earned on
interest-earning assets.
Interest Expense
Interest expense was $1.1 million, or 4.8% of average interest-bearing deposits,
for the quarter ended June 30, 2000 as compared to $954,000, or 4.6% of average
interest-bearing deposits, for the corresponding period in 1999. Interest
expense increased by $102,000 due to an increase of $4.6 million in the average
balance of interest bearing liabilities during the quarter ended June 30, 2000
compared to the quarter ended June 30, 1999, and a 20 basis point increase in
the average rate paid on interest bearing liabilities.
Provision for Loan Losses
There was no provision for loan losses during the quarters ended June 30, 2000
and 1999. Management considered many factors in determining the necessary levels
of the allowance for loan losses, including an analysis of specific loans in the
portfolio, estimated value of the underlying collateral, assessment of general
trends in the real estate market, delinquency trends, prospective economic and
regulatory conditions, inherent loss in the loan portfolio, and the relationship
of the allowance for loan losses to outstanding loans. At June 30, 2000 and
1999, the allowance for loan losses represented .39% of total loans. The
allowance for loan losses was at a level consistent with management's analysis
of the loan portfolio.
Non Interest Income
Non-interest income amounted to $30,000 for both quarters ended June 30, 2000
and 1999. The largest item in non interest income is service fees on loan and
deposit accounts, which amounted to $24,000 and $26,000 for 2000 and 1999,
respectively.
Non Interest Expense
Non-interest expense increased approximately $146,000, or 34.1% to $574,000 for
the quarter ended June 30, 2000 compared to $428,000 for the comparable period
in 1999. Non-interest expense was 2.0% and 1.6% of average assets for the
three-month period ended June 30, 2000 and 1999, respectively. The increase of
$146,000 was due primarily to increases of $77,000 in compensation and benefits,
$15,000 in occupancy expenses, $13,000 in data processing expenses, and $49,000
in other operating expenses offset by a decrease of $8,000 in federal and other
insurance premiums. The increase of $77,000 in compensation and benefits is
primarily due to the addition of a new Chief Executive Officer effective October
1, 1999, four additional employees hired for the new branch office in
Lawrenceburg, Kentucky, which opened February 14, 2000,
10
and normal salary increases. The increase of $15,000 in occupancy expenses,
$13,000 in data processing, and the increase of $49,000 in other operating
expenses were all related to the operations of a new branch office in the
quarter ended June 30, 2000, which is located in Lawrenceburg, Kentucky.
Income Taxes
The provision for income tax expense amounted to approximately $149,000 and
$202,000 for the quarters ended June 30, 2000 and 1999, respectively, which as a
percentage of income before income tax expenses amounted to 34.0% for both
periods.
Results of Operations for the Nine Months Ended June 30, 2000 and 1999
Net Income
Net income decreased by $239,000 or 21.1% for the nine-month period ended June
30, 2000 as compared to the same period in 1999. The net decrease of $239,000
was due to an increase of $361,000 in non-interest expense, an increase of
$5,000 in the provision for loan losses, and a $3,000 decrease in non-interest
income offset by a $7,000 increase in net interest income, and a $123,000
decrease in income tax expense.
Interest Income
Interest income was $5.9 million, or 7.3% of average interest-earning assets for
the nine-month period ended June 30, 2000 compared to $5.8 million, or 7.1% of
average-earning assets for the nine-month period ended June 30, 1999. Interest
income increased by $146,000 or 2.5% from 1999 to 2000. The increase in interest
income was due to an increase of 20 basis points in the average rate earned plus
a $665,000 increase in the average balance of interest-earning assets during the
nine-month period ended June 30, 2000 compared to the nine-month period ended
June 30, 1999.
Interest Expense
Interest expense was $3.0 million, or 4.7% of average interest-bearing deposits,
for the nine-month period ended June 30, 2000 as compared to $2.9 million, or
4.7% of average interest-bearing deposits, for the corresponding period in 1999.
Interest expense increased by $139,000 or 4.9% from 1999 to 2000. The increase
in interest expense was due primarily to a $3.8 million increase in the average
balance of interest bearing liabilities for the period ended June 30, 2000
compared to the corresponding period in 1999.
Provision for Loan Losses
The provision for loan losses during the nine-month period ended June 30, 2000
amounted to $15,000 as compared to $10,000 for the corresponding period in 1999.
Management considers many factors in determining the necessary level of the
allowance for loan losses, including an analysis of specific loans in the
portfolio, estimated value of the underlying collateral, assessment of general
trends in the real estate market, delinquency trends, prospective economic and
regulatory conditions, inherent loss in the loan portfolio, and the relationship
of the allowance for loan losses to outstanding loans.
11
Non-Interest Income
Non-interest income amounted to $81,000 and $84,000 for the nine-month periods
ended June 30, 2000 and 1999, respectively. The largest item in non-interest
income is service fees on loan and deposit accounts, which amounted to $67,000
and $73,000 for the nine-month period ended June 30, 2000 and 1999,
respectively.
Non-Interest Expense
Non-interest expense increased $361,000 or 27.8% to $1.7 million for the
nine-month period ended June 30, 2000 compared to $1.3 million for the
comparable period in 1999. Non-interest expense was 2.0% and 1.6% of average
assets for the nine-month periods ended June 30, 2000 and 1999, respectively.
The increase of $361,000 was due primarily to an increase of $195,000 in
compensation and benefits, $33,000 in occupancy expenses, $32,000 in data
processing expenses, and $116,000 in other operating expenses, offset by a
$15,000 decrease in federal and other insurance premiums. The increase of
$195,000 in compensation and benefits is primarily due to the addition of a new
Chief Executive Officer effective October 1, 1999, four additional employees
hired for the new branch office in Lawrenceburg, Kentucky and normal salary
increases. The increase of $33,000 in occupancy expenses, $32,000 in data
processing expenses, and $116,000 in other operating expenses was due to the
operations of the new branch office, which began operations effective February
14, 2000 and expenses incurred in changing the name of the bank effective
January 1, 2000.
Income Taxes
The provision for income tax expense amounted to approximately $462,000 and
$585,000 for the nine-month periods ended June 30, 2000 and 1999, respectively,
which as a percentage of income before income tax expense amounted to a 34.0%
for both periods.
Year 2000
Like many financial institutions, the Bank relies on computers to conduct its
business and information systems processing. Industry experts were concerned
that on January 1, 2000, some computers might not be able to interpret the new
year properly, causing computer malfunctions. Some banking industry experts
remain concerned that some computers may not be able to interpret additional
data in the year 2000 properly. The Bank has operated and evaluated its computer
operating systems following January 1, 2000 and has not identified any errors or
experienced any computer system malfunctions. The Bank will continue to monitor
information systems to assess whether its systems are at risk of misinterpreting
any future dates and will develop appropriate contingency plans to prevent any
potential system malfunction or correct any system failures. The Bank has not
been informed of any such problem experienced by its vendors or its customers,
nor by any of the municipal agencies that provide services to the Bank.
Nevertheless, it is too soon to conclude that there will not be any problems
arising from the Year 2000 problem, particularly at some of the Bank's vendors.
The Bank will continue to monitor its significant vendors of goods and services
with respect to Year 2000 problems they may encounter as those issues may effect
the Bank's ability to continue operations, or might adversely affect the Bank's
financial position, results of operations, and cash flows. The Bank does not
believe at this time that these potential problems will materially impact the
ability of the Company to continue its operations; however, no assurance can be
given that this will be the case.
12
The expectations of the Bank contained in this section on Year 2000 are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve substantial risks and uncertainties
that may cause results to differ materially from those indicated by the forward
looking statements. All forward looking statements in this section are based on
information available to the Bank on the date of this document, and the Bank
assumes no obligation to update such forward looking statements.
Non-Performing Assets
The following table sets forth information with respect to the Bank's
non-performing assets at the dates indicated. No loans were recorded as
restructured loans within the meaning of SFAS No. 15 at the dates indicated.
June 30, September 30,
2000 1999
--------------- ---------------
(amounts in thousands)
Loans accounted for on a non-accrual basis:(1)
Real Estate:
Residential............................................... $ - $ -
-------------- --------------
Total .................................................... - -
--------------- ---------------
Accruing loans which are contractually past due 90 days or more:
Real Estate:
Residential............................................... 411 214
Other .................................................... 99 23
Consumer.................................................. 49 44
--------------- ---------------
Total .................................................... 559 281
--------------- ---------------
Total of non-accrual and 90 day past due loans.................. $ 559 $ 281
=============== ===============
Percentage of net loans......................................... .57% .32%
=============== ===============
Other non-performing assets(2).................................... $ - $ -
=============== ===============
At June 30, 2000, the Bank did not have any loans in non-accrual status.
Accordingly, all income earned for the nine months ended June 30, 2000 on the
loans in the table above, has been included in income.
At June 30, 2000, there were no loans identified by management, which were not
reflected in the preceding table, but as to which known information about
possible credit problems of borrowers caused management to have serious doubts
as to the ability of the borrowers to comply with present loan repayment terms.
- --------
1 Non-accrual status denotes any loan past due 90 days and whose loan balance,
plus accrued interest exceeds 90% of the estimated loan collateral value.
Payments received on a non-accrual loan are either applied to the
outstanding principal balance or recorded as interest income, or both,
depending on assessment of the collectibility of the loan.
2 Other non-performing assets represent property acquired by the Bank through
foreclosure or repossessions accounted for as a foreclosure in-substance.
This property is carried at the fair market of the property value, net of
selling expenses.
13
The Bank's actual capital and its statutory required capital levels based on the
consolidated financial statements accompanying these notes are as follows (in
thousands):
June 30, 2000
--------------------------------------------------------------------------------------
To be Well
Capitalized Under
For Capital Prompt Corrective
Adequacy Purposes Action Provisions
------------------------- ------------------------- -------------------------
Actual Required Required
------------------------- ------------------------- -------------------------
Amount % Amount % Amount %
------------ ------------ ------------ ------------ -------------- ----------
Core capital $ 21,545 19.4% $ 4,435 4.0% $ 6,652 6.0%
Tangible capital $ 21,545 19.4% $ 1,663 1.5% N/A N/A
Total Risk based capital $ 21,917 21.1% $ 8,318 8.0% $ 10,397 10.0%
Leverage $ 21,545 19.4% N/A N/A $ 5,543 5.0%
September 30, 1999
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To be Well
Capitalized Under
For Capital Prompt Corrective
Adequacy Purposes Action Provisions
------------------------- ------------------------- -------------------------
Actual Required Required
------------------------- ------------------------- -------------------------
Amount % Amount % Amount %
------------ ------------ ------------ ------------ -------------- ----------
Core capital $ 22,556 21.2% $ 4,260 4.0% $ 6,390 6.0%
Tangible capital $ 22,556 21.2% $ 1,598 1.5% N/A N/A
Total Risk based capital $ 22,906 36.9% $ 4,961 8.0% $ 6,201 10.0%
Leverage $ 22,556 21.2% N/A N/A $ 5,325 5.0%
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
required each federal banking agency to implement prompt corrective actions for
institutions that it regulates. In response to this requirement, OTS adopted
final rules based upon FDICIA's five capital tiers. The rules provide that a
savings bank is "well capitalized" if its total risk-based capital ratio is 10%
or greater, its Tier 1 risk-based capital ratio is 6% or greater, its leverage
capital ratio is 5% or greater and the institution is not subject to a capital
directive. Under this regulation, the Bank was deemed to be "well capitalized"
as of June 30, 2000 and September 30, 1999. There are no conditions or events
since those notifications that management believes would change its
classifications.
Liquidity
The liquidity of the Company depends primarily on the dividends paid to it as
the sole shareholder of the Bank. At June 30, 2000, the Bank could pay common
stock dividends of approximately $12.1 million.
The Bank's primary sources of funds are deposits and proceeds from principal and
interest payments of loans. Additional sources of liquidity are advances from
the FHLB of Cincinnati and other borrowings. At June 30, 2000, the Bank had
advances from FHLB totaling $1.5 million. The Bank utilizes FHLB of Cincinnati
borrowings during periods when management of the Bank believes that such
borrowings provide a lower cost source of funds than deposit accounts and the
Bank desires liquidity in order to help expand its lending operations.
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The Company's operating activities produced positive cash flows for the
nine-month periods ended June 30, 2000 and 1999.
The Bank's most liquid assets are cash and cash-equivalents, which include
investments in highly liquid, short-term investments. At June 30, 2000 and
September 30, 1999, cash and cash equivalents totaled $3.4 million and $8.4
million, respectively.
At June 30, 2000, the Bank had $47.9 million in certificates of deposits due
within one year and $17.0 million due between one and three years. Management
believes, based on past experience, that the Bank will retain much of the
deposits or replace them with new deposits. At June 30, 2000, the Bank had $2.9
million in outstanding commitments to originate mortgages, excluding $1.6
million in approved but unused home equity lines of credit and $1.2 million in
approved but unused lines of credit and letters of credit. The Bank intends to
fund these commitments with short-term investments and proceeds from loan
repayments.
OTS regulations require that the Bank maintain specified levels of liquidity.
Liquidity is measured as a ratio of cash and certain investments to withdrawable
savings. The minimum level of liquidity required by regulation is presently
4.0%. During the third quarter of fiscal year 2000, the Bank satisfied all
regulatory liquidity requirements, and management believes that the liquidity
levels maintained are adequate to meet potential deposit outflows, loan demand,
and normal operations.
Impact of Inflation and Changing Prices
The consolidated financial statements and notes thereto presented herein have
been prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and operating results in terms of
historical dollars without considering the change in the relative purchasing
power of money over time and due to inflation. The impact of inflation is
reflected in the increased cost of the Company's operations. Unlike most
industrial companies, nearly all the assets and liabilities of the Company are
monetary in nature. As a result, interest rates have a greater impact on the
Company's performance than do the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or to the same
extent as the price of goods and services.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings..............................................................................None
Item 2. Changes in Securities..........................................................................None
Item 3. Defaults Upon Senior Securities................................................................None
Item 4. Submission of Matters to a Vote of Security Holders............................................None
Item 5. Other Information..............................................................................None
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
June 30, 2000.
Exhibit 27..................................................................Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Harrodsburg First Financial Bancorp, Inc.
Date: August 10, 2000
--------------------------------------------------
Jack Hood, President
Date: August 10, 2000
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Teresa W. Noel, Treasurer
17